Five out of six requirements in estimating and risk assessments were missed.
A required audit of Defense Department compliance with both the 2002 and 2010 improper payments laws found shortfalls in five of six key areas, according to a new Pentagon inspector general report.
Those laws require the Pentagon comptroller to publish an annual financial statement according to the Office of Management and Budget’s governmentwide guidance on curbing wasteful agency payouts to undeserving claimants.
IG auditors reviewed the fiscal 2016 financial report issued by the Defense undersecretary or comptroller, compared it with departmental and OMB guidance under the two laws and interviewed Defense personnel on reduction targets, sampling plans, program completeness and corrective action plans for 10 programs that report improper payments.
The findings? The Pentagon financial office had complied with only one of six requirements, namely its report of an overall improper payment rate of less than 10 percent for each relevant program and activity. The five requirements Defense did not meet were:
- Publish the annual financial statement by March 1, 2017 (it was delayed due to unresolved discussions between the DoD OIG and DoD management over the accounting treatment of certain transactions);
- Conduct a risk assessment for the Navy Commercial Bill Pay Office–Singapore payment program and report a risk assessment of each program’s susceptibility to significant improper payments in accordance with OMB guidance;
- Publish statistically valid improper payment estimates for Defense Travel Pay and U.S. Army Corps of Engineers Travel Pay—and ensure that all payments required to be tested were included in the sample plans used to estimate improper payments;
- Include planned or actual completion dates for corrective actions for all programs that report improper payments, and include information required by OMB for four programs; and,
- Meet the requirements to achieve the reduction target for two of the nine programs—DoD Travel Pay and U.S. Army Corps of Engineers Travel Pay—with established targets.
The Pentagon chief financial officer staff said they relied on internal controls at the component level rather than comply with all the department-level requirements for completeness, and as a result must now submit a new report to Congress detailing a plan of action for compliance.
The inspector general recommended that the comptroller coordinate with components to verify and report improper payments and address specific instances of noncompliance with OMB directives. The deputy CFO and managers at the U.S. Army Corps of Engineers said they have addressed all the recommendations, agreeing to have reduction targets for programs such as the travel pay programs in place by Nov. 15, 2017. The Deputy CFO agreed to coordinate with Defense components by Nov. 15, 2018, to verify that all programs are assessed for risk and include all payments made for improper payment programs.
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